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Thursday, October 6, 2011

Anglo gets full ownership of Peace River Coal

Thu,Oct06, 2011

ANGLO American said yesterday it had acquired full ownership of its Peace River Coal partnership in British Columbia by purchasing the 25,17% in the metallurgical coal venture that it did not already own for $166m.

Anglo American has purchased the 12,18% stake held by Northern Energy & Mining for $76m, and the 12,99% held by Hillsborough Resources for $81m plus $9m for Hillsborough’s royalty rights.

Anglo American will be progressing a feasibility study to increase production at Peace River to 3,5-million tons a year by 2015 from 1-million tons, it said yesterday.

Reuters has reported that Anglo American might be among the bidders for Australian coal miner New Hope, which put itself up for auction yesterday.

New Hope said it had received several informal approaches and it would invite selected parties to bid, starting a process that could test Australia’s openness to foreign mine owners. New Hope would not name the interested parties.

Analysts said firms in rapidly growing China and India were probably among them, although industry officials in India said New Hope might be too expensive for an Indian company to acquire.

A takeover of New Hope, which has its own port, would be the latest in a string of deals in Australia’s coal sector, reflecting demand to feed Asia’s strong growth.

Chairman Robert Millner hinted that New Hope could be a reluctant target, but the company was obliged to explore any deal that would give shareholders best value. The company has A$1,5bn ($1,4bn) on its balance sheet and does not need a partner to fund expansion.

"We have not been out shopping the company. We are going down this path purely because we have had these approaches from numerous third parties," Mr Millner told Reuters, adding they were "preliminary and incomplete proposals".

New Hope’s open-cut New Acland mine produces thermal coal used in power plants. New Hope sells about 65% of its coal overseas and the rest to the domestic market.

A potential buyer could be China’s Yanzhou Coal Mining, which earlier this year unsuccessfully bid for Australia’s Whitehaven Coal.

Murray Bailey, the MD of Yanzhou’s Australian operations, Yancoal, is a former chief operations officer at New Hope.

London-based bankers said that Anglo-Swiss miner Xstrata, its peer Anglo American and commodity trader and miner Glencore might also be interested in New Hope.

"This is a region of the world where Xstrata is a major player and the product is important to them," one of the bankers said, although he added that he was not aware that any of those companies had appointed banks to work on a potential bid.

Indian firms such as GVK Power & Infrastructure and Adani have also been active in Australia.

Australia has scrutinised foreign miners’ bids very closely in recent years, particularly those from state- linked Asian companies, and has at times rejected them or imposed strict conditions.

New Hope is 59,7% owned by diversified investor Washington H Soul Pattinson, where Mr Millner is also the chairman.

New Hope had been talking to the interested parties for four to five months and would look at setting up a data room after indicative proposals came in within the next two months, he said.

"As there has been more and more interest, we decided this was the best and fairest way to go down this process," Mr Millner said. (sourced Bloomberg, Reuters)

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